WCM Global Long Short Limited

WLS Details

Updated NTA Statement: WCM Global Long Short Limited (ASX: WLS) formerly known as Contango Income Generator Limited (ASX: CIE), invests in firms listed on ASX which are outside the top 20 largest companies and deliver a tax-effective dividend stream. WLS was primarily involved in managing investment in the WCM Focused Global Growth Long-Short Offshore Fund Limited from 1 October 2020-30 June 2021. The company reported a Net Tangible Assets (NTA) of $0.887 per share after-tax as of 15 November 2021.

Resignation Update: On 11 October 2021, Anthony Rule, resigned from the position of Joint Company Secretary.

FY21 Highlights:

• WLS reported ~$3.81 million net operating profit after tax for FY21 versus a net loss of ~$14.15 million in FY20 due to the increase in the value of its investment portfolio.
• The total income/ revenue generated from the investment gains and dividend income was ~$9.44 million in FY21 versus ~$(14.05) million in FY20.
• The post-tax NTA value per share rose from ~$0.754 as of 30 June 2020 to ~$0.760 as of 30 June 2021.
• The company held ~$41.12 million cash and cash equivalents as of 30 June 2021 compared to ~$4.05 million as of 30 June 2020.
• WLS paid no dividends for FY21 compared to ~$4.14 million dividend distribution in FY20.

Total Revenue & Net Income from FY20-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces interest rate fluctuations, credit and liquidity risk on investments, and regulatory changes.

Outlook: WLS plans to continue its newly adopted global long-short strategy to enhance the portfolio and shareholder value by investing in the WCM Focused Global Growth Long-Short Offshore Fund Limited.

The Board focuses on addressing WLS’ share price discount to NTA and continuously monitor the stock price during the initial two years of the current investment management agreement with WCM. It will prioritise the discount concern and seek shareholder approval if necessary to execute corporate strategies. The company perceives appointment of WCM as a positive outcome.

Stock Recommendation: The stock of WLS gave a positive return of ~15.32% in the past six months and a positive return of ~13.49% in the past nine months. The stock is currently trading at par to its 52-weeks’ high level of $0.730. Considering the current trading levels, technical levels as mentioned below, decent returns in the past months and key risks associated with the business, we give a ‘Sell’ rating on the stock at the current market price of $0.730, as of 26 November 2021, 12:23 PM (GMT+10), Sydney, Eastern Australia.

Technical Commentary

On the daily chart, WLS stock prices are hovering near an upward sloping trend line resistance zone at AUD 0.74 level and trading below the trendline. The momentum oscillator RSI (14-period) is trading at ~36.17 level, indicating a lack of momentum in the price. An important support level for the stock is placed at AUD 0.695 while resistance level is at AUD 0.74. 

WLS Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. 

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